CFTC Halts KalshiEX Rule Change and Orders Fulfillment of Executed Trades Amid State Conflict

The Commodity Futures Trading Commission (CFTC) has exercised its statutory authority to stay a proposed emergency rule change by designated contract market KalshiEX, LLC. The Commission simultaneously enacted emergency powers to order KalshiEX to fulfill open trades following standard exchange practices, intervening against a state-level directive. The regulatory intervention follows a Michigan state court order instructing KalshiEX to cancel certain previously executed transactions involving residents of Michigan. In response, the CFTC directed the registered entity to proceed with normal trade fulfillment, emphasizing federal statutory requirements. According to the CFTC, the Commodity Exchange Act (CEA) mandates a uniform national market structure for derivatives trading. Under federal law, market participants must be granted impartial access to CFTC-regulated trading venues, and registered entities are legally required to establish and enforce non-discriminatory, transparent access standards. CFTC Chairman Michael S. Selig stated that states cannot mandate that designated contract markets violate federal obligations, nor does federal law permit exchanges to discriminate against residents of any state. Selig highlighted that canceling previously executed trades is an unprecedented step that undermines contracting certainty and threatens broader market stability. While Michigan is the first state to seek the direct cancellation of executed derivatives contracts, multiple states have attempted enforcement actions against CFTC-regulated exchanges in state and federal venues. In defense of its exclusive federal jurisdiction, the CFTC has filed lawsuits against Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, and Wisconsin, and submitted amicus briefs in the U.S. Court of Appeals for the Sixth and Ninth Circuits, as well as the Supreme Judicial Court of Massachusetts.